30M Windows Phone 7 Handsets by 2011? Yup -- It's Math, not Magic

Eyebrows went up when people realized that Microsoft (MSFT) had set a goal to sell 30 million copies of Windows Phone 7 by the end of next year. Given that the first Windows 7 devices won't appear until the end of this year, that pretty much means 30 million phones in a year. Aggressive? Absolutely. Difficult? Oh, yeah. Impossible? Nope. People who write off the prediction as bravado don't see the bigger picture. This isn't about Microsoft. It's about a market growing so quickly that most of the industry and public haven't yet come to terms with the explosion.

You can easily understand the skepticism:

This seems a lot especially for a new platform but the company is expecting that 40% of the handsets sold in 2011 will be smartphones (compared to only 14% in 2010) and hopes to grab a piece of the pie and generate money through the licensing fee and services integrated in WP7 (Zune music and movie downloads and 30% cut in the Marketplace). Just for comparison's sake, Apple has sold 51,234,000 iPhones to date (and they are probably going to continue to sell a whole lot..).

But the thought isn't totally outrageous when you look at history:

Now, during his Consumer Electronics Show keynote in 2009, Microsoft CEO Steve Ballmer claimed sales of 20 million Windows Mobile devices. "We have delivered 11 different mobile phones that have each sold a million units each, and in the past year," Ballmer said. "We've brought to market over 30 new Windows Mobile phones, or more than any other mobile platform in the market--and our partners have sold more than 20 million Windows Phones in the past 12 months."So perhaps it's not unreasonable to think the company could sell 30 million devices running Windows Phone 7, which seems a far, far more compelling operating system than its predecessor.

Microsoft has cited IDC projections as evidence, although the market researcher questioned the interpretation, saying that its numbers were for both Windows Mobile 6 and Windows Phone 7. But for a moment, look at how the smartphone market is behaving:

Google (GOOG) has just seen a 67 percent quarter-over-quarter growth in Android activations.
Between Q3 of its fiscal year 2009 and Q1 of 2010 -- two quarters -- Apple (AAPL) approximately doubled the sales rates of iPhones.
In 2009, smartphones were 15 percent of all handset sales globally.

Microsoft pointed to IDC projections, but with two unspoken assumptions: Windows Phone 7 will cannibalize Windows Mobile, and Microsoft will benefit from industry growth. Don't think of Windows 7 as a little brother of Windows Mobile -- which still sold 3.7 million units in the first quarter of 2010, or an annualized rate of almost 15 million -- so much as the replacement. Apply manic smartphone growth and the bet that Microsoft can double that number in a year doesn't seem so impossible.

Related:

Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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